The role of financial intermediaries in monetary policy transmission

Beck, Thorsten; Colciago, Andrea; Pfajfar, Damjan

doi:10.1016/j.jedc.2014.04.010

Cited by 47 publications

(26 citation statements)

References 69 publications

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“…These works on the financial accelerator do not explicitly model a financial sector, exactly as in our setting where we aim to disentangle the channels through which financial activities affect physical and human capital accumulation without providing a microfoundation for the financial sector. After the recent financial crisis several works have tried to microfound the role of financial intermediaries, and a variety of different approaches to do so have been proposed (for recent surveys, see Quadrini, ; Brunnermeier et al ., ; Beck et al ., ) . A typical assumption in these works is that the financial sector is composed by profit‐/utility‐maximizing agents who affect economic activities by attempting to achieve their self‐interest (see, among others, Gertler and Kiyotaki, ; Gertler and Karadi, ; Quadrini, ).…”

Section: The Modelmentioning

confidence: 99%

Financial development and economic growth: long‐run equilibrium and transitional dynamics

Bucci

Marsiglio

2018

Scottish J Political Eco

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We analyze the impact of financial development on economic growth. Differently from previous studies that focus mainly on balanced growth path outcomes, we also analyze the transitional dynamics of our model economy by using a finance‐extended Uzawa–Lucas framework where financial intermediation affects both human and physical capital accumulation. We show that, under certain rather general conditions, economic growth may turn out to be non‐monotonically related to financial development (as suggested by the most recent empirical evidence) and that too much finance may be detrimental to growth. We also show that the degree of financial development may affect the speed of convergence, which suggests that finance may play a crucial role in determining the length of the recovery process associated with exogenous shocks. Moreover, in a special case of the model, we observe that, under a realistic set of parameters, social welfare decreases with financial development, meaning that even when finance positively affects economic growth the short‐term costs associated with financial activities more than compensate their long‐run benefits.

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Section: The Modelmentioning

confidence: 99%

Financial development and economic growth: long‐run equilibrium and transitional dynamics

Bucci

Marsiglio

2018

Scottish J Political Eco

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“…; Benigno ; Galati and Moessner ; Beck et al . ) and we therefore do not provide an in‐depth discussion of these contributions. Instead, this subsection focuses on what theoretical approaches appear most promising in offering insights on the impact and transmission mechanism of macroprudential tools.…”

Section: Alternative Approaches To Investigate the Effectiveness Of Mmentioning

confidence: 99%

What Do We Know About the Effects of Macroprudential Policy?

2017

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The literature on the effectiveness of macroprudential policy tools is still in its infancy and has so far provided only limited guidance for policy decisions. In recent years, however, increasing efforts have been made to fill this gap. Progress has been made in embedding macroprudential policy in theoretical models. There is increasing empirical work on the effect of some macroprudential tools on a range of target variables, such as quantities and prices of credit, asset prices, and on the amplitude of the financial cycle and financial stability. In this paper we provide a critical review of recent progress in theoretical and empirical research on the effectiveness of macroprudential instruments.

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“…To a macroeconomist, the fi nancial system (and especially the banking system) is contributive to economic growth and requisite for the transmission of monetary policy (Yusifzada & Mammadova, 2015;Beck et al 2014, p. 1-2), but to a microeconomist, the fi nancial system (and especially its banking component) is helpful in resource allocation and transformation of fi nancial contracts and securities in the broadest and versatile sense of the word (Freixas & Rochet, 2008, p. 15). Nonetheless, it is only natural that the fi nancial system is not credited with the purpose of resource allocation alone, but fulfi ls a variety of functions covering access to a payment system, asset transformation in terms of liquidity, quality and maturity, risk management, information processing and delegated monitoring of borrowers (Bhattacharya & Thakor, 1993;Freixas & Rochet, 2008, p. 2, 15-18;Ahn & Le, 2014, p. 7-9). These functions lower transactions costs of both defi cit and surplus economic agents (i.e.…”

Section: Research In Financial Intermediation and Loan-to-deposit Ratiomentioning

confidence: 99%

“…Financial intermediaries, their reasons of existence or functions and behaviour have been explored deeply and debated in literature, and a number of models have been proposed to study their decision-making or behaviour (see e.g. Bhattacharya & Thakor, 1993;Freixas & Rochet, 2008). These models build on elements of microeconomic theory and attempt to inject a dose of rationality into the behaviour of different economic agents, shedding thus light on how they decide and how they time their decisions.…”

Section: Introductionmentioning

confidence: 99%